The Need for High-Tech Farming in Vietnam

June 4, 2018 Posted by Vietnam Briefing Reading Time: 5 minutes

By: Dezan Shira & Associates
Editor: Koushan Das

The agriculture industry contributes around 20 percent to the GDP while employing 40 percent of the working population in Vietnam. However, both numbers are predicted to decline in the near future. To ensure a sustainable growth going forward, the industry needs to move towards high-tech farming and value chain development to reduce costs, increase production, and achieve better product quality.

The sector continues to suffer from low product quality and climate change which reduces its competitiveness. The government has taken note of these issues and pledged to offer numerous incentives to farmers, cooperatives, and private firms to encourage investments in high-tech farming solutions in Vietnam. Currently, high-tech agricultural products only contribute around a quarter of the total value of agricultural products, leaving significant room for growth.

High-tech farming firms

According to a new decision by the Prime Minister, there are certain procedures and criteria that need to be fulfilled by a firm for it to be recognized as a high-tech agricultural firm. These include:

Use of high-tech applications as mentioned in Article 5 of Law on High Technologies. It includes information technology, biotechnology, new material technology, and automation technology;
Producing quality products of higher value through high-tech applications and ensuring that revenues of such products account for at least 60 percent of the total revenue;
Conducting R&D activities for production, with total R&D spending accounting for at least 0.5 percent of the total revenue, and ensuring that more than 2.5 percent of the total employees are graduates involved in R&D; and
Applying environmental friendly and energy efficient solutions.

In the last decade, only 29 agricultural production zones and 20 firms have used technology in their production process in Vietnam. Most of these entities are in Bac Ninh, Lam Dong, HCM City, Vinh Phuc, Thai Nguyen, and Mekong Delta. These regions also lead in terms of high-tech agricultural cooperatives.

As of January 2017, there are around 12,000 agricultural cooperatives in Vietnam, with only 193 being high-tech cooperatives. Around 85 percent of these focus on plantation and forestry, while nine percent and six percent focus on animal husbandry and aquaculture respectively. Around two-thirds of the country’s 63 provinces and cities have established high-tech cooperatives, with Central Highlands and Mekong Delta leading with 57 and 35 cooperatives respectively. Lam Dong and Long An lead amongst provinces, at 36 and 14 cooperatives respectively.

Government support

The Vietnamese government has introduced a number of policies and incentive schemes to attract private firms and encourage local producers to shift towards high-tech agriculture applications. In March 2017, the Prime Minister had approved a credit package worth US$4.4 billion (VND100 trillion) for high tech application loans. The loan package will allow commercial banks to provide loans at 0.5 to 1.5 percent, much lower than current commercial loans rates.

The government had also issued Decree 57/2018/ND-CP focusing on incentives and policies to increase investments in agriculture and development of rural areas. It focuses on land rights and rents, reductions and exemptions in taxes, and financial support from provincial and national development programs for R&D and technology transfer.

Going forward

The Prime Minister has approved a master plan on developing high-tech agriculture zones by 2020 through 2030. The plans aim to develop large-scale and modern agriculture production methods through R&D to increase quality and reduce costs. By 2030, the country aims to have at least 10 more hi-tech agricultural zones in Lao Cai, Phu Tho, Son La, Nam Dinh and Nghe An provinces and Hanoi.

In addition, the government also plans to have at least 500 hi-tech agricultural cooperatives and increase the high-tech farming production value by five times by 2020. Around 60 percent of the cooperatives would be located in production hubs such as Mekong River Delta, Red River Delta, Central Highlands, and around 30 to 40 percent of them would use automation technology models and biotechnology from the current 17 percent.

Apart from the incentives, development programs, and investments, the government will continue to reach out to countries experienced in such technologies such as Israel, South Korea, and Japan to develop training programs for high-tech farming to support local producers.

Need to do more

In addition to the development of cooperatives and agricultural zones, the government needs to increase the linkages of such entities with firms and buyers for the overall development of the value chain.

Another crucial area the State needs to invest in is training, as labor quality continues to remain low in the agriculture sector. They can do so through vocational training centers or training programs focusing on areas such as water preservation, biotech, and new material technology. The local producers need to be educated about the benefits of high-tech farming such as reduced costs, better quality, and higher production value and how it can help them to cope with the effects of climate change.

About Us

Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, India, Indonesia, Russia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at vietnam@dezshira.com or visit us at www.dezshira.com

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